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May 30, 2014

Kabir Mirchandani was the original prince of
price cutting. One who redefined prices and margins in entertainment
electronics especially Televisions . Kabir Mulchandani, now 41, had captured popular imagination as a "gotcha-have-it" guy in the mid 90s. Someone
who wrote his own rules and got others to play by them.

Kabir’s company Baron entered the Indian CTV
market on December 23, 1994, reviving the Akai brand and crashed the prices. At
that time each Inch of television would cost a thousand that is a 21 inch TV
was costing 21,000/- and 29 inch TV was 29,000/-. The existing TV makers were
well entrenched and were happy with respective market shares.

When Kabir entered the business, black and white
TV sets were outselling colour sets three to one. At the heart of this
imbalance was the price. An average 21 inch colour set in 1993 cost
nearly Rs.21,000, roughly four times the national per capita consumption expenditure.

So,
Kabir "incentivised" the shift to colour. Through gifts, financing
schemes and exchange offers. He broke down the price barrier and brought
colour television into lower middle class homes. In this he was helped
by the cable revolution which bloomed in 1992-93. Kabir realized the
potential of luring consumers if he could make it affordable. And he did
just that.

Armed with a sizeable advertising budget - it crossed Rs.120
crore in 1997 - Kabir used the media cost effectively to spread this
message of affordability His choice of the medium, mainly newspapers and
large hoardings, was in itself unconventional.

When Mumbai's
hoardings went empty, Kabir offered to take them at less than 25 per
cent of the rentals, gaining exposure at a fourth of the price.
Similarly, his advertising in papers are normally on week-ends. Rationale:
big-tag shopping takes place with family in attendance on holidays. "I
sell around 2,500 sets on Saturdays and Sundays as compared to 1,200 on
weekdays," Kabir explained.

In four years, Baron International had launched 13 different schemes to potential Akai TV buyers; the offers included free two-in-ones, gold coins, pagers, 14-inch sets, washing machines, mobile phones, refrigerators, even club memberships.

The
most effective was the exchange scheme that Kabir pioneered. Well aware
of the national tradition of not discarding anything, Kabir decided to
play on it. For as little as Rs.9,999, he goaded owners of old TV sets to trade them for brand new ones. Other manufacturers soon followed suit.

Even the competition acknowledged that Kabir had made a difference. "The consumer electronics market
has periodically seen new marketing innovations," said BPL's then Director
Rajeev Chandrashekar. "Kabir's exchange offers have certainly brought a new
element into consumer durables marketing." Indeed, the exchange fever
has gripped virtually every segment of the consumer market, even cars.

In the process, Baron International's CTV sales grew from 2,500 in
1993-94 to 4.29 lakh in 1997-98, with every other TV company being forced to match
the gifts and emulate the exchange offers.

Mulchandani launched focused buy, buy, buy campaigns with his
full-page advertisements. He didn't allow the consumer time to lie back and
think. Most purchases were instinctive, which is what the campaigns achieved.

In the process, he changed the rules of the game in entertainment
electronics. His strategy was to make people buy rather than sell his product. The
strategy was built keeping in mind the
price-sensitive and value-conscious Indian consumers. It paid rich dividends.

Kabir Mulchandani sold at wafer-thin margins of 2
per cent, good enough for him to make money through high volumes. In 1998, ties
with Akai soured, and Kabir tied up with Aiwa, citing Aiwa's "superior
product range".

Akai was the first split-up. But soon, it became
a pattern. Baron seemed to have hit it off with Aiwa, but they soon fell out. In the meantime, Baron had declined to renew its
contract with Hitachi and soon it snapped ties with TCL. And with each of them,
Kabir followed the same marketing strategy to bump up sales. Aiwa's gleaming
music systems, for instance, came with offers like 'Rs 7,000 off on your old
system and 50 CDs free!'

And
with a trade-in, he sold 29-inch TCL televisions for Rs 12,900! But again,
these tie-ups soured and Kabir was left looking for yet another partner.
Analysts say Kabir Mulchandani's business model
didn't have long-term sustainability. For one, it
meant frequent switching of collaborators and the race once run couldn't be
re-run.

Baron didn't build any back-up strength in terms
of after sales service or any credible
infrastructure to maintain consumer confidence. That finally meant the doom for
the prince but he taught us all a lesson. Be aggressive in the market pace, challenge
the holy cows and believe in yourself and offer value to the customers. The things
that he missed out - not minding the basics,not building long term relationships based on trust and not focusing on less
glamorous but important issues like customer service, quality and gaining
customer confidence.

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Dr.M. Anil Ramesh is an M.B.A, PhD from Osmania University, (overall 7th rank, 1st In Marketing stream), Hyderabad, India.
Presently Dr.M.Anil Ramesh is working as Director at Siva Sivani Institute of Management a Premier B-School based at Secunderabad, Telangana State.
Dr.M.Anil Ramesh has 30 years of experience both in Industry and in Academics. Widely read and traveled Dr.M.Anil Ramesh is a Management expert who appeared on many TV talks and shows. Dr.M.Anil Ramesh also writes a popular column in a popular English Daily Newspaper - HANS India.
The views expressed by the author in this blog are his own and do not necessarily represent the views of the institute where he works.
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